Obama: 'Optimistic' Congress can act to avoid fiscal cliff

WASHINGTON, Dec. 28 (UPI) -- U.S. President Barack Obama said Friday Senate leaders were working on a budget deal "that will pass both houses" of Congress before the end of the year.

The president told reporters at the White House his hour-plus meeting earlier in the day -- with Treasury Secretary Tim Geithner; House Speaker John Boehner, R-Ohio; House Minority Leader Nancy Pelosi, D-Calif.; Senate Majority Leader Harry Reid, D-Nev.; and Senate Minority Leader Mitch McConnell, R-Ky. -- was "a good and constructive discussion" on averting the co-called fiscal cliff, a combination of rising income tax rates and federal spending cuts set to take effect Tuesday if Congress does not act.

"I'm optimistic we may be able to reach an agreement that will pass both houses in time," Obama said.

The president said Reid and McConnell were working on a possible agreement, but if they were unable to produce one, he will urge Reid to bring what he called a basic package up for a vote in the Senate. Obama said such a package would preserve current tax rates on the first $250,000 of everyone's income, extend long-term unemployment insurance benefits for about 2 million workers and "lay the groundwork for future cooperation on economic growth and deficit reduction."

Pelosi said the meeting had been a frank discussion of the issues.

"Candor is constructive and I think it moved us," Pelosi said.

She said Obama agreed that whatever solution emerges, it will have to come from the Senate, rather than the House, which is charged in the Constitution with originating any tax legislation. The Senate could amend a bill passed by the House during the summer that preserved the Bush-era tax cuts for everyone.

"We're waiting to see what Leader Reid and Leader McConnell can find as far as a legislative path to go forward," Pelosi said. "I would say the president led in that direction of saying the speaker says we need to hear from the Senate so let's have the Senate put something together and see where that takes us."

Boehner said this week the House would not take any action unless the Senate acts first.

Politico reported McConnell will not support any measure that cannot pass muster with House Republicans.

A conference call had been 5:30 p.m. Friday between White House staff and chief executive officers. Geithner, acting Office of Management and Budget Director Jeff Zients and Obama adviser Valerie Jarrett were to take part, but not the president, the White House said.

In advance of the meeting, McConnell said he'd review Obama's latest plan to avoid the "fiscal cliff."

"We'll see what the president has to propose," McConnell said. "Hopefully, there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis."

Obama was expected to outline elements he thinks should be in a deal that could get majority support in both chambers of Congress, a person familiar with the matter told The Wall Street Journal. Obama was not expected to put forward a specific bill or legislative language, the Journal said.

At best, the leaders would seek to create a narrow bill that could be passed at the last minute, legislative officials said.

Reid said prospects of passing even a slimmed-down bill before Monday were fading fast.

"I have to be very honest. I don't know time-wise how it can happen now," he said.

Some officials floated the possibility of a retroactive bill passed after the cliff deadline passed. Most officials said they believed any deal would most likely emerge in the Senate.

Leaders in both parties told The Washington Post talks were quietly under way between aides to McConnell and senior White House officials ahead of Friday's Oval Office meeting.

Reid criticized Boehner in unusually personal terms Thursday, accusing him of running the House as a "dictatorship" in which he would not bring forward legislation to avert the fiscal cliff because it might pass with broad Democratic support and only a handful of Republican votes.

Boehner had no immediate comment.

House GOP leaders announced late Thursday they would call members back into session Sunday, with a possible vote that evening. The lawmakers were warned the House might be in session through Wednesday, the day the 112th Congress disbands, and then continue Thursday after the new Congress is sworn in.

That scenario would occur if the cliff deadline passes with no agreement and GOP leaders bring up legislation to reverse the tax increases and spending cuts retroactively, Republicans participating in the call told the Journal.

In that case, the retroactive bill would be voted on by the 113th Congress.

The new Congress will have more Democrats in both chambers than in the current Congress -- nine more Democrats in the House and two more in the Senate -- but Republicans will still be the majority in the House, while Democrats retain the majority in the Senate.

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